According to recent researches by Facebook and MasterCard, majority of young people don’t trust traditional banks, favoring new fintech services instead.
In 2016, Facebook IQ (a team of researchers, scientists and analysts funded by Facebook Inc.) published a paper titled Millenials + money: The Unfiltered Journey. The underlying research surveyed 70 million of working young people from the U.S. (21 to 34 years old, so-called Millenials or Y Generation) as to their stance towards financial issues.
Young Americans Don’t Trust Banks
The paper states that absolute majority of youngsters (nearly 92 per cent of those surveyed) feel pronounced mistrust towards the existing banking system. Generally, people (with youngsters included) see the existing financial system as monopolist and tending to exercise excessive control over money.
The research also states that nearly 68% of youngsters are sure that banks lack full understanding (or pay no attention whatsoever) to their needs. This renders the existing banking system ineffective, obsolete and senseless in the world of tomorrow.
Apart from that, the Facebook IQ researchers note that upwards of 45% of the younger generation manifests its willingness to abandon traditional banks for alternative fintech solutions. Thus, even now a multitude of youngsters from around the world effectively moves towards efficient, transparent and safe non-banking services.
The document reads:
“Millennials also feel disconnected from the financial services industry. Many financial institutions have yet to realize that winning over the Millennial generation will require a transformative overhaul — from how each institution views its competition to how it connects with clients.”
Notably, 30% of youngsters see nothing positive in using credit and debit cards, while 57% of those surveyed prefer cash as a means of storing value for long-term purposes and routine transactions.
MasterCard Research: Millions of Europeans Don’t Use Banks
As it turns out, financial isolation isn’t specific to developing economies like African nations, and some Asian and South American nations, but to 138 million residents of Europe as well.
According to the research by MasterCard, and contrary to the widespread opinion, nearly a third of Europe’s working population (with 35% of them being young people) does not use plastic cards. The basic reasons for lack of a bank account and failure to use financial services lie not just in some deficiency of financial literacy, but also in great mistrust to the banking sector.
Twenty per cent of those surveyed don’t have any intention to open an account, while 10 per cent state they don’t trust banks with their money.
Anne Cairns, president international for MasterCard, states:
“Together with innovation and education, digital prepaid solutions and electronic payments can help to bridge gap between technology and financial services. By tapping into the rapid rise in technology, we can develop new solutions to ensure everyone in Europe has access to the financial system.”
Notably, not that long ago, in summer 2015, MasterCard spoke of digital currencies quite harshly. They stated that their risks seriously outweigh their advantages. Responding to the HM Treasury’s inquiry, the payments operator insisted that digital currencies had very little positive features. Adding to that, MasterCard ostracized statements on low cost and speed of digital currency transactions, as well as those on general safety of digital currency ecosystem.
In particular, the report read:
“We would argue that, when compared to MasterCard’s network, the claims pertaining to the speed and safety of digital currencies [do] not hold up, not least given that on average it takes 10 minutes for a block to be verified and that digital currencies are far more susceptible to hacking attacks.”
The report went on stating that the cost of a digital currency transaction is indeed lower than that of traditional payments methods, yet the credit goes to the lack of any responsibility for customer protection or AML compliance.
Still, by late 2015, the company’s overall stance towards cryptocurrencies has seemingly changed. Back then Anne Cairns stated that bitcoin’s evolution is headed towards integration of the global financial system. MasterCard started talking softly of digital currencies, de-facto recognizing their right to become a part of a unified financial ecosystem.
Shortly afterwards, MasterCard invested in the cryptoindustry having funded Digital Currency Group.
Bitcoin a Perfect Solution?
Demonetization alongside with stiffening monetary policies everywhere has eventually caused fiat money to lose their function of value storage. These days, bitcoin is a means of payment having the full functionality of money. Its high liquidity and stability of exchange rate (at least, in 2016) make it one of the most practical and viable alternatives for traditional financial institutions for millions of people worldwide.
Yet, which is more important, bitcoin grants one financial freedom, and lets one avoid excessive supervision from authorities and regulators. Bitcoin’s future isn’t that indefinite after all.
By Alexander Kondratiyk